Taxation more equitable now as direct taxes yield more: FM

Finance Minister Nirmala Sitharaman asserted on Tuesday that India’s direct tax collections are now on par with or slightly higher than the indirect tax revenues, bringing in equity in taxation so that it focusses more on those who can bear the burden rather than taxing small items of daily use that affect everybody.

Noting that direct tax collections were sustaining momentum, the Minister recalled that in 2020 and 2021, a lot of observers flagged concerns about the principles of taxation in the Indian economy.

“There were questions on how indirect taxes were contributing a lot more than direct taxes and questions of equity were raised, saying is this the India where revenues will come more from indirect which falls on everybody rather than through direct taxation that falls only on those who can earn and can pay that rate of tax imposed on them,” she said.

 Acknowledging the ‘broad principle’ for equitable taxation is more direct taxation rather than ‘disproportionately more’ indirect taxes, Ms. Sitharaman said that situation only persisted for a few months.

“After that, the easy, smooth way in which direct taxes improved substantially and today, are on par with or one better than the indirect tax collections… that’s brought in the principle of equity because taxation will have to be on those who can pay more, pay better and who can have the shoulders to bear the tax not on small items of daily use,” she said at an event to award officers of the Income Tax department.